Course Code / Course Name
LCA 4562
ISLAMIC BANKING, TAKAFUL AND SECURITIES
Status / Level MAJOR / DEGREE
Credit Hours 3 CREDIT HOURS
LECTURES: 2 HOURS X 14 sessions TUTORIALS : 1 HOUR X 14 sessions
Methodology LECTURES AND TUTORIALS / DISCUSSIONS
Evaluation Coursework
[a] Assignment/Article Review 15% [b] Presentation/ Participation 10% [c] Mid semester examination 15% Final Examination
40% 60%
Lecturers Zulkifli bin Hasan
LL.B (Hons) (IIUM), LL.B (Bachelor of Shariah) (IIUM), Master of Comparative Laws (IIUM)
Advocate and Solicitor (Malaya), Syarie Counsel
Objectives The main objectives of this course are: -
1) To expose the students with the basic principles underlying all the products available in Islamic banking, takaful and securities.
2) To crtitically examine both the products and their underlying contracts in line with the syariah principles. 3) To understand the legal documentation and its effect to
law as applied in the civil courts.
4) To equip the students with the necessary training in the area of Islamic commercial law so as to qualify them to practice in that area.
Course Synopsis Islamic law of banking, takaful and securities which are section of Islamic commercial law has developed significantly in the recent decades. It covers almost every aspect of commercial transactions from banking, finance, capital market and insurance. This course will enable the students to understand the position of Islamic banking, takaful and securities in Malaysia as well as other countries.
Since the coverage of this course is relatively wide, the course will only examine a few selected but leading and contemporary issues. The main statutory legislations involved will be Banking and Financial Institutions Act 1989, Islamic Banking Act 1983, Takaful Act 1984, Securities Commission Act1993.
This course is conceptually divided into three main sections, namely Islamic banking, Islamic Insurance and Security.
Part one will discuss on Islamic banking and it includes banking history, overview of modern financial management, relevant banking legislation, important features of Islamic banking legislation, the concepts and modus operandi of Islamic banking and finance as currently practiced by financial institutions. This will include the sectors of deposit, banking services, finance and investment. Principles of Islamic law of contract as well as transactions will be highlighted to relate the products to Islamic law principles. Aspects of legal documentation will also be examined to relate the shariah principles to civil law principles and vice versa. Also cases which have been decided by the civil courts pertaining to Islamic banking products will be critically examined.
Part two discusses on the introduction of Islamic insurance. The same line of discussion will apply to the practice of takaful even though the volume of the practice and its problem are not as many as in the banking sector. Occasionally an attempt is made to consult the law and the practices of other muslim countries as far as Islamic banking and takaful operations are concerned.
Part three discusses on the introduction of the Islamic securities in Malaysia. Amongst the topic to be covered are history of security regulations in Malaysia, shariah principles, types of securities, function of security market, roles of authorities, licensing, disclosure of information and offences.
Nik Nozrul Thani. 2001. Legal Aspects of the Malaysian Financial System. Kuala Lumpur: Sweet and Maxwell.
Lee Mei Pheng. 2003. Banking Law. Kuala Lumpur: Malayan Law Journal.
Mohd Ma’sum Billah. 2007. Applied Islamic and Modern Insurance. Sweet and Maxwell.
Mohd Ma’sum Billah. 2007.Applied Islamic Law of Trade and Finance. Sweet and Maxwell.
Siddiq Al Dareer . 1997. Al Gharar in Contracts and Its Effect on Contemporary Transactions. IRTI.
Habib Ahmed, Mohammad Umar Chapra . 2002. Corporate Governance in Islamic Financial Institution. IRTI.
Saleh Kamel. 1998. Development of Islamic Banking Activity: Problems and Prospects. IRTI.
Ausaf Ahmad . 1993. Instruments of Regulation and Control of Islamic Banks by the Central Banks. IRTI.
Mahhmoud Ahmad Mahdi . 1995. Islamic Banking Modes for House Building Financing. IRTI.
Munawar Iqbal, Mabid Ali Al Jarhi. 2001. Islamic Banking: Answers to Some Frequently Asked Questions. IRTI. Salman Syed Ali . 2005. Islamic Capital Market Products - Developments & Challenges. IRTI.
Fahim Khan. 1995. Islamic Financial Institutions. IRTI. Hasan al-Amin. 2000. Legal Status (Hukm) of Contemporary Banking Transactions with Interest. IRTI.
Tariqullah Khan, Mohammad Umar Chapra . 2000. Regulations and Supervision of Islamic Banks. IRTI.
Islamic Fiqh Academy . 2000. Resolutions and Recommendations of the Council of the Islamic Fiqh Academy 1985-2000. IRTI. Mohammad Nejatullah Siddiqi . 2004. Riba, Bank Interest and the Rational of its Prohibition. IRTI.
Malaya: Kuala Lumpur,.
Ahmad Ibrahim and Ahilemah Joned, 1995. 2nd Ed, The Malaysian Legal System, Dewan Bahasa dan Pustaka: Kuala Lumpur,.
Ahmad Ibrahim, The Principles of An Islamic Constitution and The Constitution of Malaysia: A Comparative Analysis, (1989) 1 (2) IIU Law Journal 1.
Ahmad Ibrahim, “Legal Framework of Islamic Banking”, IKIM Law Journal, Vol.1 (1): 1997
Ahmad Khusary, Siyasah Iqtisadiyyah wa Nusm Al-Maliyah fi Al-Fiqh Al-Islami, Maktabah Al-kuliyat Al-Azhariyah: Cairo.
Al Rajhi, Qatar-led group get Islamic banking licenses. (2004, October 15). New Straits Times. p. B1.
Barth, J.R., j.r. Caprio Jr., and R. Levine (2001), “Banking Systems around the Globe: Do Regulations and Ownership Affect Performance and Stability?” in frederick S. Mishkin, Editor: Prudential Supervision: What work and what Doesn’t, University of Chicago Press.
Fuad Omar and Mohammed Abdel-Haq, 1996. Islamic Banking Theory, Practice and Challenge, Oxford University Press: Karachi.
Halal Malaysia, Islamic Capital Market and Financial Services, YADIM: Kuala Lumpur, 2003.
Islamic Banking Practice From The Practitioner’s Perspective, Bank Islam Malaysia Berhad: Kuala Lumpur.1994.
Jaafar Husin, 1990. “Islamic Financial System in the 1990s”, in Malaysian Law News, June 1990.
Laporan Tahunan 2004, Bank Negara Malaysia.
Mohd Awal, 1989. Banking System: Legal Impediments Towards Its Islamisation in Malaysia, in Jurnal Perundangan 1 (1) ABIM: Petaling Jaya.
Mohd Daud Bakar, “ Cabaran dan Halangan Terhadap Pelaksanaan Muamalat di Malaysia”, working paper presented at Dewan Agama dan Falsafah, Dewan Bahasa dan Pustaka, Kuala Lumpur, 2001.
Bhd..
Mohamed Ismail bin Mohamed Shariff, “ Salient Features of Islamic Banking Act 1983 and Banking and Financial Institutions Act 1989”, working paper presented during Seminar on Syariah and Legal Aspects of Islamic Banking Practice, BIMB Institute of Research and Training, Kuala Lumpur, 1996.
Mohamed Ismail Mohamed Shariff, Isu –isu Rangka Kawalselia dan Perundangan Dalam Pasaran Modal Islam, Muzakarah Pasaran Modal Islam, Suruhanjaya Sekuriti Kualala Lumpur, 6th September 2005, p.19
Muzakarah Pakar “Memantapkan Sistem Kewangan Islam: Ke Arah Mencapai 20% Pasaran Kewangan Negara Menjelang 2010”. 22-23 September 2005/18-19 Syaaban 1426h at Pusat Dagangan Dunia Putra, Kuala Lumpur.
n.a. 2004. “Al Rajhi, Qatar-led group get Islamic banking licenses”. New Straits Times. 15 October. p. B1
Norhashimah Mohd Yasin, Financing Aspects of Al-Bay’ Bithaman Ajil (BBA) contracts, (1997) 3 CLJ Supp. at P.V.
Norhashimah Mohd Yasin, Financing Aspects of Al-Bay’ Bithaman Ajil (BBA) contracts, (1997) 3 CLJ Supp. at P.V.
Norhashimah Yasin, Legal Constraints in Applying Islamic Banking and Finance in Malaysia. Seminar on Islamic Banking.Law Students’ Society International Islamic University Malaysia.30th August 2002.
Nor Muhamed Yakcop, 1996. Teori, Amalan dan Prospek Sistem Kewangan Islam di Malaysia, Utusan Publication and Distributors:Kuala Lumpur.
Pang J, 1996. Banking in Malaysia, Longman:Kuala Lumpur. Penentuan Hukum produk Perbankan Islam: Pengalaman Bank Negara Malaysia, Muzakarah ahli-Ahli Majlis Penasihat Syariah Institusi Kewangan di Malaysia, Bahagian Penyelidikan JAKIM, Hotel Pan Pacific, 4-5 Mac 2004.
Peraturan Majlis Kebangsaan Bagi Hal Ehwal Islam Malaysia in Jurnal Hukum,Vol 1, 1980, Bahagian Ugama Jabatan Perdana Menteri, Kuala Lumpur, Bahagian I-II.
Practice Direction No.1/2003, High Court of Malaya.
Securities Commission, 2002. Resolutions of the Securities Commission Syariah Advisory Council, Perpustakaan Negara Malaysia: Kuala Lumpur.
Sudin Haron, 1996. Prinsip dan Operasi Perbankan Islam, Berita Publishing Sdn Bhd.: Kuala Lumpur.
Sudin Haron, Bala Shanmugam, 1997. “Islamic Banking System: Concepts & Applications”, Pelanduk: Petaling Jaya.
The Guidelines on the governance of Syarah Committee for The Islamic Financial Institutions, issued by BNM in December 2004 Wahbah Zuhaili, 2002. Fiqh Islami Wa Adillatuhu, Vol. IV, Dewan Bahasa dan Pustaka: Kuala Lumpur.
Wan Mohamad Hj Abd. Aziz, Pengurusan Fatwa di Malaysia, Muzakarah Ahli –Ahli Majlis Penasihat Syariah Institusi Kewangan di Malaysia, Hotel Pan Pacific, KLIA, Sepang, 4-5 Mac 2004
Zulkifli Hasan, The Roles and Responsibilities of the Syariah Advisory Council in the Islamic Financial Institutions. (Journal Shariah). 2006. Academy of Islamic Studies, Malaya University. Zulkifli Hasan, The Legal Thought Of Madhhab Syafi’i in the Implementation of Islamic Banking in Malaysia. Jurnal Undang-undang IKIM. Julai 2006. IKIM.
Zulkifli Hasan. Shariah Governance in the Islamic Financial Institutions in Malaysia. Journal of Management and Muamalah. Vol.1. 2006. Kolej Universiti Islam Antarabangsa Selangor. Zulkifli Hasan. A Syariah Perspective on the Letter of Offer as Practiced by the Islamic Financial Institutions: A Comparative Study with the Malaysian Law of Contract. Malaysian Journal of Shariah and Law (2006), Volume 1. Islamic University College of Malaysia.
Zulkifli Hasan. ‘Uqud In Financial Services For Enterpreneurship.”Islamic Financial Services” Kolej Universiti Islam Malaysia. 2006.
Zulkifli Hasan. The Effectiveness of The Legal Framework Of The Islamic Banking System In Malaysia. National Seminar In Islamic Banking and Finance 2006. 29-30 August 2006 organised by Faculty of Economy and Muamalat, KUIM.
organised by Faculty of Syariah and Law, KUIM held on 20-21 September 2006.
Zulkifli Hasan, 2005, “The Roles and Responsibilities of the
Syariah Advisory Council in the Islamic Financial
Institutions”, Seminar Ekonomi dan Kewangan Islam, Universiti Utara Malaysia, Institut Latihan Keselamatan Sosial KWSP Zulkifli Hasan, 2005, Perlaksanaan Perbankan Islam Di Di Malaysia: Ke Arah Harmonisasi Undang-Undang Syariah Dan Sivil, Seminar Rekonstruksi Ekonomi Islam, Universiti Islam Sharif Hidayatullah Jakarta, Indonesia dan Fakulti Ekonomi dan Muamalat, KUIM, Pandan Indah, KUIM, 9 Februari 2005. Cases
Che Omar Bin Che Soh v Public Prosecutor {1988} 2 MLJ 55. Commissioner for Religious Affairs, Trengganu & Ors v. Tengku Mariam [1969] 1 MLJ 110.
Mohamed Habibullah v. Faridah [1992]2 MLJ 793
Bank Islam v. Adnan Omar [1994] 3 CLJ 735; [1994]3 AMR 44 Dato’ Nik Mahmud Bin Daud v. Bank Islam Malaysia Berhad [1996]4 MLJ 295 (HC); [1998]3 MLJ 393 (CA)
WEEK TOPIC REFERENCES
Week 1 Overview of Modern financial management of banking, capital market, insurance, securities. History of Islamic banking. The establishment of Islamic banks worldwide both in the muslim and non-muslim countries.
Different approach of Islamic banking system in the world.
Salient features of Islamic banking
Reference:-
Sudin Haron, Prinsip dan Operasi Perbankan Islam. Mohd Daud Bakar, Contracts In Islamic Commercial Law and Their Application in Modern Islamic financial System.
Theory of the classifications of transactions in Islamic commercial law
Islamic sources of fund- Overview of Islamic banking accounts and instruments.
Saving account, current account and general investment account.
Zulkifli Hasan ‘Uqud In Financial Services For Enterpreneurship.”Islamic Financial Services” Kolej Universiti Islam Malaysia. 2006.
Week 2
The Role of Central Bank of Malaysia in both conventional and Islamic bank.
Shariah Supervisory Board- role and responsibility.
Central Bank of Malaysia Act 2003.
Zulkifli Hasan. Shariah Governance in the Islamic Financial Institutions in Malaysia. Journal of
Management and
An overview of the jurisdiction of the courts in cases pertaining to Islamic banking and finance. Salient features of various statutes governing Islamic banking and finance.
An overview of Islamic Banking Act 1983.
An overview of Banking and Financial Institutions Act 1989.
Banking and Financial Institutions Act 1989 Islamic Banking Act 1983, Pakistan Banking law and Modaraba Ordinance 1980.
Law of Usury Free Banking Iran 1983. Mohamed Ismail
Mohamad Sharif, Salient features of Islamic banking Act 1983. Zulkifli Hasan. The Effectiveness of The Legal Framework Of The
Islamic Banking System In Malaysia. National
Seminar In Islamic Banking and Finance 2006. 29-30 August 2006 organised by Faculty of Economy and Muamalat, KUIM.
Week 3 The basis of the introduction of Islamic banking system.
The Prohibition of Usury, Gharar and Khatar in Islamic Commercial law.
Mohd Daud Bakar, Riba and Islamic banking. Vogel and Hayes, Islamic law and finance.
Week 4 Critical analysis of BBA House financing, Bay Inah, Bay Al-Dayn and Ijarah financing facility. Legal Issues of Islamic banking and its prospects.
Reference:-
Norhashimah Mohd Yasin, Financing Aspects of BBA Contracts, [1997] CLJ Supp. P.i.
Week 5 Non Performing debts in Islamic banking. Default payment and compensation in Islamic banking.
Bank Security
(a) Goods As Security
Pledge of goods
Transfer of possession Pledgees power of sale Mortgage of shares Letter of lien (b) Guarantees
Nature of guarantee
Strict compliance with the terms of guarantee
Consideration
Presumption of influence (c) Letter of Credit
Nature of letter of credit Types of credit
Negotiable and transferable letter of credit.
Mohd Daud Bakar, Issues of compensation of late payment, Late delivery and penalty in Islamic banking.
Week 6 Islamic Insurance- An overview
The origin and reason d’etre of insurance in western society-
Islamic principles of spreading risk.
Mutual insurance- Principle of blood money in Islamic criminal law.
Ahmad Hidayat Buang, Takaful: Akad Insuran and Mudharabah” Journal Syariah. Vol 4 No.1 1996. Mohd Daud Bakar,
Week 7 The Legal Framework of Islamic Insurance in Malaysia.
Critical reading of the Takaful Act 1984 vis a vis Insurance Act 1996.
Nik Ramlah Nik Mahmoo, Islamic system of Mutual Insurance in Malaysia, Arab Quarterly.
Week 8 Analysis on the issues of modern Islamic
insurance contract- insurable interest, the subject matter and the claim.
Mohd Daud Bakar, Challenge and prospect of takaful business, IKIM Journal,Vol 7 No. 1, 1999.
Week 9 Islamic law on the insurance system of both general and life insurance.
Modus operandi and policies
Week 10
The development of takaful companies in Muslim Countries.
Retakaful and reinsurance.
Modus operandi and policies and its essence in modern commercial development.
Mohd Burhan Abruna, the Operation of retakaful, Arab Law Quarterly, Vol 15 Issue No 4, 2000.
Week 11
Securities.
Islamic securitization –debt and asset securitization –
Shariah issues of Islamic bonds/notes in the secondary market.
Zaki Badawi, Debt
Trading: A consensus Too Far, Islamic Banker, Issue No 3, 1996.
Week 12
Background of security regulations in Malaysia. Securities industry law in Malaysia
Securities Commission Act 1993
Securities Industry Act 1983
Securities Industry ( Central Depositories) Act 1991.
Week 13
Principles of Islamic investment in the stock market and the theory of Islamic liquidity.
Justice Taqi Usmani, Principles of Shariah governing Islamic Investment funds. Week
14
Islamic derivatives-Islamic options and Islamic futures.
